Funding Mechanism

The South Asian Development Fund (SADF)

The South Asian Development Fund (SADF) was created in 1996 with the merger of the SAARC Fund for Regional Projects (SFRP) and the SAARC Regional Fund, as recommended by the Twenty-first Session of the Standing Committee and endorsed by the Sixteenth Session of the Council of Ministers (New Delhi, 18-19 December 1995). The SADF objectives are to support industrial development, poverty alleviation, protection of environment, institutional /human resource development and promotion of social and infrastructure development projects in the SAARC region. The Fund is to be utilized for projects in one or more SAARC countries which are of significant economic interest of 2 or more countries.

SADF started with a resource base of US$5 million under SFRP contributed on pro-rata basis by the SAARC Member States. It has a fund of about $6.6 million. SADF has the following Windows:
First window - Identification and development of projects
Second window - Institutional and human resources development
Third Window - Social development and infrastructure development

The SADF Secretariat, which has been rotating among the nodal development financing institutions (DFIs), receives project proposals from Government/ public/ private sectors through Nodal DFIs/ National Focal Points as well as from recognized SAARC Bodies. DFIs are to take necessary measures to identify sponsors for implementation of projects for which studies have been completed. SADF has so far financed about 16 project studies.

The SAARC Development Fund (SDF)

In the last few years, SAARC has been considering proposals like Poverty Alleviation Fund, Infrastructure Fund, South Asian Development Bank, Media Development Fund, and Voluntary Fund for the Differently Able Persons, in addition to the SADF. In order to avoid proliferation of funds, the First Meeting of Financial Experts was convened in September 2005 to look at the entire gamut of issues relating to funding of SAARC projects and programmes.
The Meeting of Financial Experts, amongst others, agreed that proliferation of financing mechanisms would pose administrative, financial and operational difficulties, including the question of fund mobilization and management. It recommended that the SADF be reconstituted into the SAARC Development Fund (SDF), with a permanent Secretariat, with three Windows: Social, Economic, and Infrastructure.
The Thirteenth SAARC Summit (Dhaka, 12-13 November 2005) decided to reconstitute the SADF into SDF to serve as the umbrella financial institution for all SAARC projects and programmes. The Leaders directed the Finance Ministers to look into the operational modalities of the Fund.
The Second Meeting of the Financial Experts (Kathmandu, 23-24 February 2006) recommended an initial corpus of USD 300 million for the Social Window. It agreed on the broad principles and essential functional elements for the SDF. The Social Window would primarily focus poverty alleviation and social development projects. The Infrastructure Window would cover projects in the areas such as energy, power, transportation, telecommunications, environment, tourism and other infrastructure areas. The Economic Window would primarily be devoted to non-infrastructural funding.
The First Meeting of the SAARC Finance Ministers (Islamabad, 11 July 2006) considered the recommendations and approved the Framework for SDF. The Meeting agreed on a roadmap for the creation of the SDF. This was endorsed by the Twenty-seventh Session of the Council (Dhaka, 1-2 August 2006).
Subsequently, the SDF Board has been constituted. The First Meeting of the SDF Board was held at the Secretariat on 20-22 February 2007 to consider the inputs developed through the studies undertaken on legal architecture and mobilization/ generation of funds and other essential operational issues. The Meeting deliberated on various aspects of creating the SDF as a legal entity.
As agreed, an Inter-governmental Meeting on the SDF was held at the Secretariat on 15-16 March 2007 to consider the recommendations of the SDF Board. It examined draft of an agreement establishing the SDF as a juridical entity. Another Inter-governmental Meeting is anticipated soon to finalize the text of an Agreement.